Sign in
CI

Confluent, Inc. (CFLT)·Q3 2025 Earnings Summary

Executive Summary

  • Confluent delivered a clean beat on Q3 2025: total revenue $298.5M vs S&P Global consensus $292.9M*, and non-GAAP diluted EPS $0.13 vs $0.10*, with non-GAAP operating margin expanding to 9.7% .
  • Cloud revenue grew 24% YoY to $161M and represented 56% of subscription revenue; management highlighted >40% sequential growth in late-stage pipeline and stabilized NRR at 114% .
  • FY25 guidance was raised: non-GAAP operating margin to ~7% (from ~6% prior), and non-GAAP diluted EPS to $0.39–$0.40 (from ~$0.36 prior), signaling confidence in durable growth; Q4 subscription revenue guided to $295.5–$296.5M .
  • Catalysts: strong consumption trends, accelerating Flink adoption (>1,000 customers; +70% QoQ cloud ARR), and major AI launches (“Confluent Intelligence” and Real-Time Context Engine) to power enterprise AI context at scale .

What Went Well and What Went Wrong

  • What Went Well

    • “Exceeding the high end of all guided metrics” with Q3 subscription revenue $286.3M (+19% YoY), cloud revenue $161M (+24% YoY), and non-GAAP operating margin 9.7% .
    • Flink momentum: >1,000 customers, 12 >$100K ARR, 4 >$1M ARR; cloud Flink ARR grew >70% QoQ; management called the trajectory “spectacular” in year one .
    • Partner ecosystem sourcing >25% of TTM new business, up from >20% last quarter, broadening footprint and leverage at scale .

  • What Went Wrong

    • A large AI-native customer shifting from Confluent Cloud to on-prem will reduce cloud revenue with a low single-digit impact to Q4; normalized cloud growth indicates stabilization despite the headwind .
    • Ongoing optimizations in cloud remained a headwind (though “healthy/normalized” vs history); management expects optimizations to be part-and-parcel of consumption businesses .
    • GAAP results still loss-making: GAAP operating loss $(83.3)M; GAAP net loss per share $(0.19), underscoring dependence on non-GAAP profitability and continued SBC drag .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Total Revenue ($USD Millions)$271.1 $282.3 $298.5
Subscription Revenue ($USD Millions)$260.9 $270.8 $286.3
Services Revenue ($USD Millions)$10.2 $11.5 $12.2
Confluent Cloud Revenue ($USD Millions)$143.0 $151.0 $161.0
Confluent Cloud YoY Growth (%)34% 28% 24%
GAAP Net Loss Per Share ($)$(0.20) $(0.24) $(0.19)
Non-GAAP Net Income Per Diluted Share ($)$0.08 $0.09 $0.13
GAAP Gross Margin %74.5% 73.7% 74.2%
Non-GAAP Gross Margin %78.6% 78.3% 78.2%
GAAP Operating Margin %(37.3%) (34.2%) (27.9%)
Non-GAAP Operating Margin %4.3% 6.3% 9.7%
Net Cash Provided (Used) by Operating Activities ($USD Millions)$(26.8) $18.1 $30.8
Adjusted Free Cash Flow ($USD Millions)$4.9 $11.0 $24.6

Estimates vs Actuals (S&P Global):

MetricQ1 2025Q2 2025Q3 2025
Revenue Consensus Mean ($USD Millions)$264.4*$278.4*$292.9*
Primary EPS Consensus Mean ($)$0.07*$0.08*$0.10*
Actual Revenue ($USD Millions)$271.1 $282.3 $298.5
Actual Non-GAAP Diluted EPS ($)$0.08 $0.09 $0.13
Primary EPS – # of Estimates31*31*32*
Revenue – # of Estimates30*30*30*

Values retrieved from S&P Global.*

Segment/Detail (Q3 2025 only):

MetricQ3 2025
Subscription Revenue ($USD Millions)$286.3
Services Revenue ($USD Millions)$12.2
Confluent Cloud Revenue ($USD Millions)$161.0
Confluent Platform Revenue ($USD Millions)$125.4
U.S. Revenue ($USD Millions)$172.1
International Revenue ($USD Millions)$126.4
Subscription Gross Margin %81.8%

KPIs:

KPIQ1 2025Q2 2025Q3 2025
Customers ≥$100K ARR (Count)1,412 1,439 1,487
Customers ≥$20K ARR (Count)——2,533
Customers ≥$1M ARR (Count)——234
Dollar-Based Net Retention Rate (NRR)——114%
Gross Retention Rate (GRR)——~90%
RPO Growth YoY——+43%
Partner-sourced % of TTM New Business>20% >20% >25%
Flink Customers (Count)——>1,000

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Subscription Revenue ($USD Billions)FY 2025$1.105–$1.11B $1.1135–$1.1145B Raised
Non-GAAP Operating Margin (%)FY 2025~6% ~7% Raised
Non-GAAP Net Income per Diluted Share ($)FY 2025~$0.36 $0.39–$0.40 Raised
Subscription Revenue ($USD Millions)Q4 2025N/A$295.5–$296.5 Introduced
Non-GAAP Net Income per Diluted Share ($)Q4 2025N/A$0.09–$0.10 Introduced
Non-GAAP Operating Margin (%)Q4 2025N/A~7% Introduced
Cloud Revenue ($USD Millions)Q4 2025N/A~$165 (modeling point) Introduced
Adjusted Free Cash Flow Margin (%)FY 2025N/A~6% Introduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2/Q1)Current Period (Q3 2025)Trend
AI/Data Streaming PlatformQ2: DSP monetization; Flink ARR up ~3x over two quarters . Q1: mission-critical streaming; enable next-gen apps in AI age .Launched Confluent Intelligence and Real-Time Context Engine; streaming agents; deepened Anthropic collaboration .Accelerating
Go-to-Market Field AlignmentQ2: called out focus areas (per Q3 remarks of prior actions) .Late-stage pipeline progressed >40% QoQ; largest sequential net add in ≥$100K customers in two years .Improving execution
Cloud Consumption/OptimizationsQ1/Q2: broad margin progress .Optimizations at “healthy/normalized” levels; stabilized NRR at 114% .Stabilizing
Partner EcosystemQ2: >20% TTM new business from partners .>25% TTM new business; strengthening AWS/MongoDB relationships .Increasing contribution
CSP/Open-source ReplacementQ2: growing takeouts (implied) .Win rate well above 90%; average deal size more than doubles over past two quarters; WarpStream 8x consumption YoY .Strong tailwind
Regional MixNot highlighted Q1/Q2.U.S. +13% YoY ($172.1M); International +29% YoY ($126.4M) .International outpacing
MarginsQ1/Q2: non-GAAP OM 4.3%→6.3%; non-GAAP GM ~78% .Non-GAAP OM 9.7%; subscription GM 81.8% (above LT target) .Expanding

Management Commentary

  • CEO: “We delivered a strong Q3 exceeding the high end of all guided metrics… This foundation uniquely positions Confluent to provide the real-time context AI systems need.” .
  • CFO: “Operating margin increased 340 bps to a record 9.7%, exceeding our guidance by 270 bps… Adjusted free cash flow margin increased 450 bps to 8.2%.” .
  • CEO on CSP takeouts: “We have maintained a win rate well above 90%, with average deal size more than doubling over the past two quarters… a tailwind to subscription gross margin over time.” .
  • CFO on Flink: “Over 1,000 paying customers for Flink; about 12 customers >$100K ARR and four >$1M ARR… Flink will be a material contributor to Confluent Cloud in FY26.” .

Q&A Highlights

  • Late-stage pipeline: New use cases moving into production grew >40% sequentially, a key driver of cloud consumption visibility .
  • Large customer dynamic: One large AI-native customer moved from cloud to self-managed; low single-digit impact to Q4 cloud revenue incorporated in guidance .
  • Optimizations: Described as “healthy/normalized,” part-and-parcel of a consumption cloud business, alongside net-new use cases and product adoption .
  • Flink adoption runway: >70% QoQ cloud ARR growth; breadth and depth across customers suggest scaling into a significant market opportunity .
  • Federal exposure: Low single-digit percent of revenue; Q3 performed in line; select federal deals baked into Q4 outlook .

Estimates Context

  • Q3 2025 beats: Revenue $298.5M vs $292.9M consensus*, EPS $0.13 vs $0.10 consensus*; strength driven by cloud consumption, DSP (Flink) adoption, and field alignment. Values retrieved from S&P Global.
  • Prior quarters also exceeded consensus: Q1 revenue $271.1M vs $264.4M*, EPS $0.08 vs $0.07*; Q2 revenue $282.3M vs $278.4M*, EPS $0.09 vs $0.08*. Values retrieved from S&P Global.
  • Expect estimate revisions: Margin expansion (9.7% non-GAAP OM) and raised FY25 EPS ($0.39–$0.40) should prompt upward adjustments to FY25 profitability assumptions; cloud growth stabilization (ex-large customer impact) supports revenue trajectory .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Confluent executed a clear beat-and-raise quarter: revenue and EPS above consensus, with non-GAAP OM up to 9.7% and FY25 EPS raised to $0.39–$0.40 .
  • Cloud momentum is durable: 24% YoY cloud growth, 56% subscription mix, and >40% sequential late-stage pipeline progression underpin near-term consumption visibility .
  • Flink and DSP are becoming material growth engines: >1,000 Flink customers and >70% QoQ cloud ARR growth, with management expecting material Cloud contribution in FY26 .
  • Competitive positioning is strengthening: >90% win rates in CSP streaming takeouts; multi-tenant Enterprise Clusters/WarpStream improve deal sizes and margins (tailwind to subscription GM) .
  • Partner leverage expanding: partners sourced >25% of TTM new business, aiding scale and sales efficiency at $1B+ revenue levels .
  • International growth outpaced U.S.: U.S. +13% YoY vs International +29% YoY, diversifying growth vectors .
  • Balance sheet robust: ~$1.99B in cash and marketable securities provides ample investment flexibility for AI and product initiatives .